Chancellor stands firm on trusts crackdown

Chancellor Gordon Brown has signalled he is standing by his Budget crackdown
on discretionary trusts despite mounting political pressure.

His determination was underlined in the Commons by paymaster general Dawn
Primarolo who told MPs: ‘It has been clear for some time that wealthy
individuals are using trusts primarily to shelter their wealth from inheritance

‘The Government believes that it is unfair for people to gain such an
advantage and we have therefore taken action to ensure that inheritance tax
exemptions apply only when trusts are set up to cater for certain prescribed

Her comments at the end of a heated Commons debate on the Finance Bill also
followed a report from the Labour-dominated Commons Treasury Select Committee
which concluded: ‘We are concerned that a legitimate measure designed to reduce
tax avoidance may penalise trusts established to protect family members, and
consider that the issues merit further consideration.’

The MPs called on the government to ‘provide detailed information about how
it has arrived at its estimate that the new rules on the tax treatment of
certain trusts will affect only “a minority of a minority” of 100,000
discretionary trusts’.

They said they also wanted the information to be provided before MPs consider
the trust provisions in the bill in detail in the committee, and said that in
future the Treasury should consider the benefits of undertaking consultation
where people had been planning their affairs on the basis of explicit tax

During the debate, the trust provisions came under sustained attack from both
the Tories and the Liberal Democrats.

Conservative Shadow Chief Secretary Theresa Villiers said a wide-ranging
‘coalition of experts and professionals’ had warned the changes will affect
‘millions of ordinary families’.

She offered to work with the government to close down ‘complex and artif
icial tax reduction schemes’ but not schemes designed to provide for family
members in a responsible way.

She claimed there was a ‘chilling prospect’ that divorce settlements would be

The Liberal Democrat Shadow Chief Secretary Julia Goldsworthy warned the
proposals would ‘create anomalies rather than resolve them’ and fail to achieve

She demanded to know how many people would be affected and urged the
government to consider the select committee’s conclusions.

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